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Gold Index
Updated 14-May-08
Quotes at time of story, top stories today:
Electronic Arts Revenue Surges
Publisher of marquee video games Rock Band, The Sims, Medal of Honor, and the Madden NFL series, Electronic Arts (ERTS 53.20, -1.37) announced after yesterday's close surging revenues and surprise adjusted earnings per share results. However, a disappointing earnings per share outlook and failed attempts to acquire Take-Two Interactive (TTWO 26.69, +0.10) are weighing on investors' confidence.
Sales surged from the prior year, driven by new game launches and continued strength of existing installments. Net revenue climbed 84% year-over-year to $1.13 billion, while non-GAAP revenue climbed 50% year-over-year to $919 million. Electronic Arts benefited from $208 million in deferred revenue related to online packaged games. The consensus sales forecast predicted revenues would total $835 million.
Higher sales drove Electronic Arts to earn an adjusted $0.09 per share, reversing last year's loss. Analysts, on average, expected the company to merely breakeven for the quarter.
For the year, Electronic Arts expects net revenues will range from $4.90 billion to $5.15 billion, while non-GAAP sales will range from $5.00 billion to $5.30 billion. Adjusted earnings are expected to range from $1.30 to $1.70 per share.
The company's sales outlook compares favorably with the consensus full-year estimate, but analysts are expecting more in the way of profits. On average, revenues for the current year are expected to total $4.57 billion, while earnings are expected to total $1.73 per share.
Applied Materials Sales Fall 15%
Continued weakness in the chip market weighed on the second quarter results of Applied Materials (AMAT 19.66, -0.20 ). The company unveiled a drop in sales, new orders, and earnings after yesterday's close, then provided a disappointing outlook for its third quarter.
The company reported revenues decreased 15% year-over-year to $2.15 billion. Analysts were expecting sales of $2.13 billion.
New orders for the quarter totaled $2.41 billion, which is 9% lower than last year. The decline was limited to the company's silicon segment, in which new orders were nearly halved from the prior year.
Earnings per share dipped more than 20% from the same quarter last year, falling to $0.26 per share. Still, the drop was less severe than analysts were expecting. On average, analysts estimated that earnings would total $0.22 per share for the quarter.
Chip orders are expected to continue their decline. According to Reuters, the company forecast a 25% to 35% decline for chip equipment spending this year, which is worse than the 5% to 15% drop previously expected.
Reflecting the weakness, Applied Material forecast third quarter earnings of just $0.10 to $0.14 per share during its quarterly conference call. The outlook fails to meet the $0.25 per share that analysts forecast.
Strong Demand Drives ArcelorMittal Higher
Global steel producer ArcelorMittal (MT 97.23) announced this morning earnings of $1.68 per share on sales of $29.81 billion. Year-over-year, earnings per share results climbed nearly 4%, while sales climbed almost 22%. However, analysts were expecting earnings of $1.82 per share on revenues of $29.96 billion.
Nonetheless, global shipments continue to show strength as developing nations require basic materials to build infrastructure. In turn, the company reported shipments of 29.2 million metric tons during the quarter, up 8% from the prior year. The strong demand for ArcelorMittal's goods have enabled the company to increase prices, helping sales and earnings growth.
Separately, as part of the company's policy to return 30% of the previous year's net income to shareholders, the value of shares repurchased during the quarter totaled $2.1 billion.
Shares of the world's leading steel company have benefited from such pricing power and fundamental support. As of yesterday's close, ArcelorMittal's stock is up 25% this year.
Macy's Earnings Dip, but Still Top Estimates
Department store giant Macy's (M 24.06) announced this morning a drop in sales and earnings results for its latest quarter, but still managed to surpass analysts' expectations. The current environment remains challenging for Macy's; as of this writing, its stock has slipped roughly 7% year-to-date.
First quarter earnings totaled $0.02 per share, excluding nonrecurring items. On average, analysts forecast a loss of $0.02 per share. One year ago, Macy's generated $0.16 per share.
Sales slipped nearly 3% when compared with the prior year's results, falling to $5.75 billion. Same-store sales declined more than 2%. Still, revenue results were better than the $5.65 billion consensus estimate.
For the full year, Macy's expects same-store sales to range from a 1% decrease to a 1.5% increase. The company offered an in-line earnings outlook for the year, seeing profits from $1.85 to $2.15 per share. The current consensus earnings estimate stands at $1.88 per share.
Like many retailers, Macy's has been challenged by the difficult economic and consumer environment. The company continues working to reduce inventory in an effort to keep operations lean. Notably, inventory levels at the quarter's end stood about 4% below last year's levels. With same-store sales slowing, we certainly would not want to see a glut of inventory building on Macy's shelves waiting to be marked down to a discount.
CPI Provides Positive Surprise
The Consumer Price Index for April was up 0.2% while core-CPI, which excludes food and energy was up 0.1%. Both numbers were better than expected, as consensus estimates were pegged at +0.3% and +0.2%, respectively.
The year-over-year growth rate for total CPI slipped to 3.9% from 4.0% in March while core-CPI dipped to 2.3% from 2.4%. The latter remains above the Fed's comfort zone of 1.0% to 2.0%, but the downtrend should be viewed by Fed members as an encouraging development.
The report fits with the Fed's view that there should be a moderation in inflation in coming months.
This is a positive inflation report. Accordingly, the futures market got a pop on the news and is now signaling a modestly higher start for stocks.
Deere Earnings Grow 28%
Shares of Deere & Co. (DE 90.19) have been unable to hold onto their gains this year, following a strong run in 2007. The company has benefited from strong demand for agricultural products, but the stock has traded in mixed fashion amid heightened expectations and profit-taking efforts.
For its most recent quarter, total net sales climbed an impressive 19% year-over-year to $7.5 billion. Sales growth remains strong on continued demand for agricultural equipment used to farm commodities. In turn, Deere expects equipment sales to increase by roughly 20% for both the third quarter and the full year.
Earnings totaled $1.74 per share, which is a 28% increase over earnings from the same period last year.
However, analysts were expecting a bit more from the agricultural and farming equipment company. The consensus sales forecast called for a top line of $7.6 billion, while the consensus earnings estimate stood at $1.75 per share.
Though Deere came up a bit short of analysts' optimistic forecasts, we remain fans of Deere as the company continues to benefit from rising global incomes and living standards, as well as strong demand for biofuels. While its shares are attracting some negative attention in premarket trading, Deere remains a fundamentally strong company in a hot agricultural market.
Sony Boosts Dividend After Solid Earnings
Sony Corporation (SNE 46.06) announced Wednesday morning healthy earnings per share results for the most recent quarter, reversing a loss for the same period last year. Giving shareholders an added treat, the company is issuing a special cash dividend and planning an increase to its annual dividend.
According to company filings, sales decreased by little more than 6%, but sales in U.S. dollars actually increased 10% to $19.5 billion, due to varying exchange rates. The decline in sales resulted from mixed results across Sony's electronics, game, and picture segments. Still, the downturn was less severe than Wall Street anticipated; the consensus revenue estimate called for $19.2 billion.
Earnings for the quarter totaled $0.28 per share, which is $0.13 better than analysts expected and a reversal of last year's loss.
Sony will be paying a year-end cash dividend of $0.125 per share, assuming a constant currency rate from the quarter's end. The company has already paid an interim dividend of the same amount, bringing the special year-end dividend payment to $0.25 per share. As for the current regular annual dividend, Sony is planning to increase the payment from $0.15 to $0.40 per share.
Looking to 2009, the company expects sales and operating results to grow just 1%, but believes operating earnings will climb as much as 20%.
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